How Climate Change is Affecting the Insurance Industry
The effects of climate change are being seen with greater frequency, from an increase in forest fires to more severe storms and hurricanes. To counter those challenges in terms of money paid out in repairs and replacements to property, those in the insurance industry are reevaluating coverage costs. Climate change is posing a problem for insurance companies to maintain and exceed current profits.
The changes are affecting insurance costs for homes, businesses and even supply chains. The result is that the insurance industry as a whole is increasing the cost of their insurance products, while some are dropping some types of coverage completely. Still, others see opportunity in climate change and are searching for new ways to capitalize on it.
The result is that many insurers are moving from the traditional insurance model to one based on mitigating risk. As the effects of climate change advance, there will be new regulatory requirements and insurers will begin factoring in potential risk predicated on how quickly change occurs.
The risk due to climate change will fall particularly hard on Florida residents due to the increasing number of hurricanes, their severity, and the state’s low elevation to sea level ratio, which is the lowest of all 50 states. The effects of new insurance products and their cost will be felt most keenly by vulnerable populations. The potential for a mega-disaster such as Hurricane Katrina has increased significantly.
The bottom line is that the full impact of global warming hasn’t been determined, but the insurance industry will be taking steps to manage risk more effectively. That will include a variety of measures that will include dropping some insurance products, introducing new options, and increasing rates. Instead of 100-year events, those in the insurance industry are now looking at the potential risk from 250-year events to manage catastrophic losses.
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6501 Congress Ave., Ste. 100
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